Cadbury Schweppes ponders European drinks sale
drinks arm, again, but whoever buys it may have a tough time
improving the division's rather average performances, reports
Chris Mercer.
An analyst at Pereire Tod told www.BeverageDaily.com that Cadbury Schweppes would probably look to sell its European portfolio, which includes Orangina, Oasis and Schweppes brands, as the company went "much more down a confectionery route".
He also said the firm had tried to sell off the same portfolio some years ago, but a buyer was not found and talks with Coca-Cola had hit problems with regulators over market concentration and competition issues.
"They've (Cadbury Schweppes) been sitting waiting in a sense. We always thought this would be a subject they would revisit."
A couple of media reports over the last two months have also alleged Cadbury was looking to sell its European drinks business, possibly to US private equity firm KKR, which last month was linked with a move for both Cadbury Schweppes and Britvic.
Cadbury Schweppes refused to comment on the issue.
Analysts believe private equity is the most obvious route for a sale because there is plenty of money kicking around and it should not raise the competition concerns that a deal with Coca-Cola, or to a lesser extent PepsiCo, might - easily Europe's top two soft drinks firms.
Any buyer would, however, have to grapple with the troubled recent performance of the Cadbury Schweppes European drinks brands.
The division lost market share across its key markets of France, Spain and Germany in 2004. Sales also declined, though margins were saved by cost savings through the firm's Fuel for Growth scheme, and a more efficient supply chain in France and Spain.
The group described the state of the division in the first half of 2005 as "satisfactory".
This contrasts with the US where Cadbury Schweppes announced that its Dr. Pepper and diet brands had helped the group out-perform an albeit struggling carbonated soft drinks market.
Cadbury Schweppes' Orangina, often seen as straddling the non-carbonated and carbonated categories, holds potential as a fairly uniquely-placed product. The firm's non-carbonated Oasis brand also has promise bearing in mind the growth in non-carbonated drinks across Europe.
But, whilst a firm like PepsiCo might be interested in snatching one of these, analysts believe Cadbury Schweppes is likely to want to sell its European soft drinks division as a whole package.
The firm will release its interim half-year results on 26 July.
